The Rising Influence of Rising Affluence

[DewDiligence]

Barron’s gives limp endorsement of INTC based on low valuation—from cover story touting the end of the “PC era”:

http://online.barrons.com/article/SB50001424053111904034104578058751530288678.html

The inexorable shift away from PCs is causing havoc for manufacturers. This year, worldwide sales of personal computers are projected to drop about 2%, to 357 million units, according to IDC's David Daoud. In dollars [as opposed ot units], they will fall 5% to 6%. More telling: Smartphone sales are expected to surge 42% this year, to $294 billion, topping PC sales for the first time. And sales of tablets are expected to rocket 65%, to $59 billion.

To Dan Niles of Alpha One Capital Partners, this sounds very familiar. He worked in the 1980s at minicomputer titan Digital Equipment Corp., whose founder, Ken Olsen, famously said there was no reason anyone would want a computer in his home. DEC was later acquired by Compaq Computer and vanished without a trace. Smartphones and tablets are similarly underestimated now, Niles asserts. For that reason, he's inclined to avoid Intel and Microsoft. "Go ahead, gamble they can make the leap to this new world," he says. "I don't want that bet."

…The problem is that Intel has more to lose from the PC decline than to gain from selling cheaper chips for tablets and smartphones. The company's shares, which closed the week at $21.27, trade at nine times next year's estimates and pay a rich 4% dividend. While Intel may never be a growth company again, it probably won't hurt investors who own it.